De Longhi Spa

Good afternoon. This is the call school conference operator. Welcome and thank you for joining the DeLonghi Third Quarter 2025 Consolidated Results Conference Call. As a reminder, all participants are in this morning mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Fabio DeLonghi, CEO of DeLonghi. Please go ahead.

Good afternoon, ladies and gentlemen, and thank you for joining the Delonghi Group conference call for our third quarter 2025 results. With me on the call today are Nicola Serafin, Group General Manager, Marco Cenci, Chief Planning and Control Officer, Stefano Biella, Chief Financial Officer, Samuele Chiodetto, Investor Relations Director and M&A Manager, and Sara Mazzucato, IR Specialist. Very pleased once again with a strong set of quarterly results delivered by the group, confirming the positive momentum of the recent periods and strengthening of our position as an industry leader. The solid performance in the quarter is evidenced by robust 11.5% growth at constant Forex and a record adjusted BDA margin of 16%. The Household Division continued its strong trajectory, achieving 7.6% growth at constant effects and outperforming the market, while the professional division further accelerated its expansion across both its brands. Providing a detailed breakdown, the professional division again posted solid results, with remarkable organic growth of over 40%, This was sustained by strong market dynamics for the business combination, reinforcing the position for both La Mazzocco and Avesis as leading high-growth, high-margin companies in the mid-cap space. The solid pace of growth seen over the recent quarters is the result of the ongoing premiumization of coffee quality and experience in the out-of-home market, where our portfolio leads along With the extraordinary and unique connection our brands have built within the coffee community over the years. This was clearly demonstrated by our enthusiastic reception for Eversy's versatile innovations launched at host, particularly the next-generation legacy machine capable of brewing cold coffee, tea, and matcha. Further evidence was the outstanding success of La Marzocco's iconic event, Out of the Box, a celebration of coffee culture, design, and innovation, which over the years has become an international and meeting point for the coffee community. The event was also an opportunity to celebrate key collaborations with partners like Porsche, Raimova, and Aimele Andorre, and featured new ones like the Victon Inox for La Marzocco Baristas Tour. The household division maintained its strong momentum, growing 7.6% at constant effects in the quarter, consistent with the previous performance and outperforming the market despite the challenging environment. This positive performance was mainly driven by the coffee category, which is benefiting from resilient trends, including the growing penetration of espresso at home. The expanding drinks variety and the continued premiumization of the range. These factors continue to foster growth in the market that, however, remains under-penetrated and underrepresented globally. We are thrilled with early results from our third Perfetto campaign. In just two months, we have seen a significant increase in social media mentions and search interest for the De'Longhi brand. This campaign marks the next step in our strategic evolution toward a full-funnel marketing strategy, which manages the entire consumer lifecycle from inspiration to post-purchase engagement. The campaign launch was supported by bold activations over the last months at high-profile events, including Milano Design Week, the F1 movie premiere in New York, and the Venice Film Festival. The objective is to generate a multiplier effect capable of balancing the weight of paid and earned media. The strategy is designed to move beyond simple audience reach, but inspires them to talk, share, and create content themselves. These efforts are strategically aimed at accelerating market expansion while cementing the longer reputation at the high-end quality benchmark in the coffee industry. Now, let me focus on the quarterly results. The group delivered an excellent performance in both divisions during the first nine months and the last quarter, with widespread growth across geographies. In more detail for the third quarter, the Europe area confirmed the positive momentum, growing 9.3% plus 9.2% at constant currency, driven by both home and professional coffee. Spain and Portugal, Belgium, Hungary, and the Nordic countries area achieved a mid-teen growth rate. Media was up 24.8%, a constant currency in the quarter, supported by both divisions, with professional coffee achieving sound results and home coffee and home care categories driving the growth for the household business. The Americas recorded an 8.2% increase in revenues, a constant currency, led by the strong professional and the home coffee performance, with a negative currency impact from the weak dollar. Finally, as the Pacific region achieved another positive quarter, growing by 20.2%, a constant currency. Both divisions contributed positively to the growth, with the Chinese market driving the region's performance. Regarding the divisions, we are very satisfied with the performance of both, as they have realized a solid and resilient pace of growth in the recent quarters. Concerning the household division, we highlight what follows. The home coffee segment confirmed once again its leading role in the division growth, posting a high single-digit increase, in particular thanks to the contribution of pump machines and espresso products. that reiterate the positive performance recorded in the first half. The nutrition and food preparation segment was down by a mid to high single-digit percentage in the third quarter. This contraction is mainly due to a negative currency effect and a challenging year-over-year comparison for personal vendors in the U.S. market, which had achieved significant double-digit growth last year. Regarding to the other categories, products in this group achieved a mid-teen expansion, driven by brown ironing segment, which once again grew at a mid-teen rate, continuing its solid expansion over the last two years. And the accessory category, a business mainly linked to coffee machines, which posted significant growth compared to last year. The professional division delivered another strong quarter, with revenue growth of over 40%. These results bring the performer expansion for the nine months to approximately 30%. The solid performance was widespread across regions and is driven by the continued premiumization of coffee quality and experience in the out-of-home market. The brand's high quality positioning allows La Marzocco and Eversys to capitalize on the growing opportunities in this segment. Looking now at evolution of profitability, the group margin improved in the first nine months of 2025, mainly supported by the growth of the professional division and margins above group average. In details, in the third quarter, the adjusted EBITDA was equal to 148.8 million euro, 17% on revenues, improving by 70 business points with respect to last year, supported by increased volumes in both divisions and a better household product mix. Price-mix contribution was slightly positive in both the nine-month period and the quarter, while the currency effect was neutral. Investment in the media and communication increased in absolute terms, but remained stable as a percentage of turnover for both the quarter and the nine-month period. In the quarter, we faced higher logistic costs and a negative impact stemming from the additional tariffs in the U.S. market. As regards tariffs, we displayed on slide six, we were able to manage this situation and minimize the potential net impact thanks to our mitigation plan, which was based on inventory buildup, price increases, and supply chain reorganization. We confer our expectation of an approximate 15 million euro net impact on Agile CDBDA in full year 25. which is already incorporated in our full year guidance. In September 2025, the group net financial position was positive at 309 million, an improvement compared to 266 million euro in September 2024. With regard to cash generation, the cash flow before dividends, buybacks, and acquisition was positive for 298 million euro in the 12th month. In the nine months, the cash flow before dividends, buybacks, acquisitions was negative for 82 million euro, mainly driven by a planned increase in inventory stemming from two factors, ordinary business seasonality and strategic buildup in the U.S. earlier this year to mitigate duty impacts. The inventory level is expected to normalize during the next months as per usual seasonality, generating cash in quarter four as it did last year, in line with our expectations. In summary, the third quarter continued on a positive trajectory. We again confirmed and outperformed the market and sustained our industry-leading margins, delivering best-in-class results. Crucially, we also preserved our financial flexibility for potential external growth, or to optimize shareholder remuneration. The House of Division continues to deliver consistently on its medium-term goal, achieving mid- to high-single-digit growth. As shown on slide 5, we expect positive contributions from the Division to continue in the fourth quarter, despite a challenging comparison. This will be driven by structural trends, robust product launches, and media investments, where our third Profetto campaign marks a strategic shift towards a full-funnel marketing approach. The professional division was a key driver delivering significant organic growth in the recent quarter. Their performance was supported by strong market dynamics for both La Marzocco and Eversys, as they capitalized on a premiumization of out-of-home coffee and a stronger engagement of the coffee community, as clearly demonstrated by the success of their brands event participation. Given our strong performance, we are raising our full year guidance, even as we continue to closely monitor geopolitical uncertainties. We now project revenue growth for the new scope of operations to be between 7.5% and 8.5%, reflecting positive contributions from both divisions. We are raising our adjusted EBITDA guidance to a range of €610 million to €620 million, which is inclusive of the tariff effects and increase in average investment to support growth. Now, welcome your questions. Thank you.

Excuse me, this is the call school conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Nicola Stoller from Kepler. Please go ahead, sir.